So now you've chosen your entity, it's been incorporated, you have startup capital and are up and running, you've spent thousands of dollars in creating a logo, branding, and marketing. Things are going great, and then one day you are hit with a cease and desist letter stating that you are infringing on another company's trademark because the name you are using is confusingly similar to the other company's name. Now you are not only in danger of being sued, but you've just wasted thousands of dollars and many months of hard work on a name and brand you can't even use. This is just one illustration of how important it is to assess as early as possible the intellectual property (IP) landscape of your company. Three questions every new business owner should ask: "What IP does my company have?", "How do I protect that IP?" "Am I in danger of infringing the IP rights of another?" This post will give a summary of the main types of intellectual property, how to protect IP, and how to avoid infringement. This is just a summary and is no means comprehensive. Every new business owner should consult with an attorney about their IP issues.
The four main types of IP: 1)Trademarks 2)Copyrights 3) Patents and 4)Trade Secrets.
Trademarks allow a company to easily distinguish itself in the marketplace in the minds of consumers. A well known trademark is often one of a company's biggest assets. Trademark law gives a company the exclusive right to use a distinctive mark used to identify its goods or services. It allows for a company to develop a brand in the marketplace without fear that another company will cause a "likelihood of confusion" by using a similar mark. Trademarks do have "common law" protection under federal law and the law of most states; meaning that you do not have to register to have protection. But registering your distinctive mark at the federal and state level provides a number of benefits. Registering serves as constructive notice that your mark is in use, it makes it easier to prove your case in court, and it gives you protection in a far greater area. Prior to registration, the mark should be followed by "TM" for trademarks and "SM" for service marks.
Not all names are available for trademark protection. The mark must be sufficiently distinctive. The level of distinctiveness depends on the context it is used. Generic or common terms are not protectable if they are used in the area they describe. For example, "Apple" is protectable when used with computers, but would not be protected if the company sold fruit. Marks can't be overly descriptive either. For example, "Eye-Care Center" would not be protectable for an optometrist's office. Suggestive marks have a better chance of obtaining protection, but are not perfect because they could be seen as too generic/descriptive. For example, "America Online" is suggestive of the services it provides. The best choice for a protectable mark would be an arbitrary or fanciful term. (Think "Yahoo!" and "Google") It should be noted generic or descriptive marks can become protectable through their use. A mark can obtain "secondary meaning" through its extensive and continuous use in commerce to such an extent that it has achieved the required level of distinctiveness.
Picking a distinctive mark is just half the battle. You must also ensure that you are not using a mark that infringes another company's rights. The basic test the courts use when determining if a mark is infringing is "likelihood of confusion" in the minds of consumers. There are thirteen factors courts consider when determining likelihood of confusion. (Known as the "DuPont Factors") You should search extensively for similar marks on the USPTO website and consult with an attorney before deciding on your mark.
Copyright law protects original works of authorship fixed in a tangible medium of expression. Obviously, this includes many areas: literary works, musical works, dramatic works, photos, paintings, sculptures, architectural works to name a few. Business that don't produce these types of works should still consider whether they have copyrightable material. Marketing materials, training materials, or other works that the business creates during its operations could potentially be copyrightable.
Anytime a business contracts to create something new it should consider the copyright involved. Just because someone creates something for a business doesn't necessarily mean the business own it. This is a common issue in "works for hire" cases, and every company should address ownership of the copyright when contracting for works made for hire.
Similar to trademarks, copyrights can be registered, but they do not have to be. Copyright protection exists from the moment of creation. But like trademarks, there are a number of benefits from registration. It is much easier to prove infringement if the copyright is registered, there are substantial statutory damages as well attorney fees available to the registered copyright holder. Copyrights are relatively easy to register compared to patents and trademarks, but registration can be deceptive in its simplicity. Consulting with an attorney is recommended.
Patent law was historically centered around companies engaged in research in development. That is no longer the case since what is patentable has greatly expanded over the last few decades due to court decisions. For example, business methods and computer software were once considered unpatentable before changes in the law. Unlike other IP, patents are only protectable once they have been approved by the USPTO. However, when resolving patent disputes, the United States is different from almost every other country in the world in that it follows a "first to invent" system instead of a "first to file" to determine the proper patent holder.
There are three types of patents in the US: utility, design, and plant patents.
- Utility -- new or useful machines, articles of manufacture, compositions of matter, and processes;
- Design -- new original and ornamental design for an article of manufacture;
- Plant -- new varieties of plants
Patents are also different from other forms of IP in that it doesn't automatically give the owner the right to use the patent. It merely prevents unauthorized use of that patent. If the owner of a patent can prove infringement, the owner is entitled to injunction to prevent further infringement and damages.
Obtaining patent protection is an expensive and time consuming process. Many patents take years to prosecute, and can be very complex. A patent agent or patent attorney should be consulted. The USPTO will only approve a patent if it is novel, useful, and not obvious. Because of the time and cost involved, business owners should carefully consider whether or not to pursue a patent.
Finally, it must be noted that a business can infringe a patent (as well as copyright and trademark) unknowingly and still be subject to damages. Every business owner should carefully examine the existing IP landscape before proceeding into new ventures.
TRADE SECRET LAW
Trade secret law is extremely important because every business, especially new businesses, have information that it feels gives it an advantage over its competitors in the marketplace, and it doesn't want them to have knowledge of the information. Under the Uniform Trade Secret Act, trade secrets are defined as:
information, without regard to form, including, but not limited to, technical, nontechnical, or financial data, a formula, pattern, compilation, program, device, method, technique, process, or plan that (1) derives independent economic value, actual or potential value, from not being generally known to, and not being readily ascertainable by proper means by other persons who can obtain economic value from its disclosure or use; and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
To protect trade secrets, owners must keep them "relatively secret" and exercise reasonable efforts under the circumstances to maintain their secrecy. What is reasonable obviously depends on the context, but some common measures include: restricting access to confidential information, having those that see the information sign confidentiality agreements, using passwords and encryption to protect digital information.
A Business should also take measures to ensure that it is not misappropriating trade secrets. When a new business begins to bring officers, managers, and employees on board, it should make clear that they can't bring the trade secrets of others with them. Furthermore, the business should ensure that the employees are not subject to confidentiality agreements or noncompete agreements to prevent a breach of those agreements.
These are just a few of the IP issues that businesses confront. IP law is a vast, complex area of law that can be a minefield for the unwary. Make sure you do your research and consult with an attorney so that your business can thrive and avoid unnecessary pitfalls.